2024Annual report

In 2024, Småkraft generated power revenue of EUR 54 million in 2024, a decrease of EUR 14 million or 20% compared to 2023 (EUR 68 million). The decrease is explained by lower power prices.

Production reached 1,811 GWh, a 20% increase compared to 2023. The average obtained spot prices per MWh decreased by 33% from EUR 45 EUR/MWh in 2023 to 30 EUR/MWh in 2024. Småkraft has production in seven different price zones in Norway and Sweden, and the obtained spot prices per MWh varied significantly between these areas.

In 2024, the mark-to-market valuation of energy derivatives, which hedge about 25%of the expected production for 2025 and 10% of 2026, resulted in a positive unrealized value change of EUR 25 million (compared to EUR 73 million in 2023). According to IFRS, these future hedge contracts, which will be realized in the coming years, are recognized in the Financial Statements at market value at year-end. However, production and revenue are not recognized until the date of production.

Småkraft is focusing on selected Alternative Performance Measures (APMs) to assess performance from operational activities. Please refer to appendix for details on these APMs. Adjusted power revenue showed a decrease of 7% for 2024 compared to 2023, highlighting the reduction in power prices in 2024 compared to the previous year.

Payroll and related costs remained at the same level as in 2023, at EUR 4.5 million. Depreciations and impairments for 2024 amounted to EUR 22 million (EUR 20 million in 2023). The increase is due to the depreciation of a larger portfolio of hydro power plants and a minor impairment related to six powerplants compared to 2023. Other operating expenses were reported at EUR 25 million, the same as in 2023.

The operating profit for 2024 was EUR 21 million, compared to EUR 76 million in 2023. Excluding unrealized value change on energy derivatives, Småkraft would have reported an operating loss of EUR 4 million, compared to a profit of EUR 2 million in 2023. Adjusted EBITDA was EUR 18 million, down from EUR 22 million.

Net financial items for 2024 reported a loss of EUR 42 million (EUR 41 million in 2023). Gross interest expenses in 2024 were EUR 20 million up from EUR 12 million in 2023. The increase in net interest expenses of EUR 7 million was partly offset by reduced negative impact of net foreign exchange losses and fair value changes of financial derivatives. Long-term financing granted in EUR implied a disagio on borrowings in 2024 of EUR 20 million (EUR 23 million in 2023).

Income tax reports an income of EUR 4 million in 2024 compared to an expense of EUR 8 million in 2023. The recognised tax positions are mainly deferred positions. Payable taxes as of 31 December 2024 were NOK 0 million compared to NOK 1 million per 31 December 2023.

Total comprehensive income 2024 was a loss of EUR 35 million in 2024, compared to a profit of EUR 7 million in 2023.

As of December 2024, consolidated total assets amounted to EUR 854 million (EUR 874 million).

Total non-current assets amounted to EUR 819 million (EUR 812 million). Current assets amounted to EUR 45 million (EUR 62 million). Taking into account time deposits presented as other receivables of EUR 8 million as per 31 December 2024 (EUR 7 million), total cash position was EUR 36 million (EUR 47 million).

Total equity amounted to EUR 368 million (EUR 386 million) a decrease of EUR 18 million, resulting in an equity ratio of 43% (44%).

Total liabilities amounted to EUR 496 million (EUR 489 million). Total borrowings increased by EUR 28 million to EUR 469 million (EUR 441 million).

Cash flow from operating activities amounted to EUR 13 million compared to negative EUR 22 million for 2023. This improvement is primarily explained by changes in working capital due to reduced cash outflow to landowners in 2024 compared to 2023, based on earnings from previous years.

Cash outflow from investing activities amounted to EUR 47 million, down from EUR 62 million, mainly due to investment in new power production capacity, either as acquisitions of operating companies or new builds.

The cash inflow from financing activities amounted to EUR 24 million, up from EUR 17 million. Shareholders contributed with new capital of EUR 32 million (EUR 68 million). The Group received EUR 61 million (EUR 123 in 2023) from new loan and paid EUR 36 million (EUR 120 million) in instalments on credit facilities.

Dividends of EUR 15 million (EUR 38 million) were paid to the shareholders.

The Group makes estimates and assumptions concerning the future. These estimates are based on the actual underlying business, its present and forecasted profitability over time, and expectations about external factors such as power prices, interest rates, foreign exchange rates and other factors which are outside the Group’s control.

The resulting estimates will, by definition, seldom equal the related actual results. There is use of judgement in the considerations related to recognition of deferred tax asset for tax losses carried forward, and considerations related to contingent liabilities. Please refer to note 3 - Key accounting estimates and judgements in the Consolidated Financial Statements for further information.

In 2024, Småkraft AS generated power revenue of EUR 23 million in 2024 (EUR 30 million), a decrease of EUR 7 million or 23%. The decrease is attributed to lower achieved power prices in 2024 compared to 2023.

Småkraft AS has production in all price areas in Norway.

In 2024 the mark-to-market valuation of energy derivatives, which hedge about 25% of the expected production for 2025 and 10% of 2026, caused a positive unrealized value change of EUR 25 million (EUR 73 million in 2023). Småkraft AS is the only company in the Group that sells forward power. According to IFRS, these future hedge contracts, which will be realized in the coming years, are recognized in the Financial Statements at market value at year end. However, production and revenue are not recognized until the date of production.

Småkraft AS is focusing on selected Alternative Performance Measures (APMs) to assess the performance from operational activities. Please refer to the appendix of this report for details these APMs. Adjusted Power revenue showed an increase of 24% for 2024 compared to 2023, primarily due to changes in the realized value change on energy derivatives, which amounted to negative EUR 7 million in 2024 compared to negative EUR 17 million in 2023.

Payroll and related costs showed a small decrease from EUR 4.4 million to EUR 4.2 million in 2024, partly explained by a weaker NOK compared to EUR over the year and lower headcount during some months.

Depreciation and impairments for 2024 was EUR 8.1 million, up from EUR 7.9 million. This increase is due to the impairment of some early-stage growth project that will not be materialised. The overall growth of the group has directly impacted the increase in other operating expenses, which increased to EUR 11 million in 2024 compared to EUR 8.7 million in 2023.

The operating profit for 2024 was EUR 18 million (EUR 66 million). Excluding unrealized value change on energy derivatives, Småkraft AS would have reported an operating loss of EUR 7 million, similar to 2023. Adjusted EBITDA, excluding same MTM adjustment, was a profit of EUR 1 million, the same as in 2023. All value changes related to energy derivatives in the Group are incurred by Småkraft AS, as all forward contracts are entered into by Småkraft AS on behalf of the Group.

Net financial items for 2024 reported a loss of EUR 23 million compared to a profit of EUR 7 million the previous year. The main reason for this difference is a reduction in recognized distributions from subsidiaries, which was EUR 30 million higher in 2023 compared to 2024. An increase in interest expenses of EUR 5 million was offset by positive developments in negative fair value changes on interest and currency derivatives and lower negative currency fluctuations EUR / NOK for loans granted in EUR.

Income tax income was EUR 1 mill in 2024 compared to an expense of EUR 14 million in 2023.

Total comprehensive income 2024 was a loss of EUR 22 million compared to a profit of EUR 40 million in 2023.

AS of 31 December 2024, total assets amounted to EUR 679 million, compared to 682 million in 2023. Total non-current assets amounted to EUR 661 million, up from EUR 657 million.

Current assets amounted to EUR 17 million, down from EUR 25 million.

Total equity amounted to EUR 385 million (EUR 390 million) a decrease of EUR 5 million, maintaining an equity ratio of 57%.

Total liabilities amounted to EUR 294 million (EUR 292 million). Borrowings increased by EUR 26 million, which was mainly offset by reduced MTM value of derivatives EUR 22 mill. Net interest-bearing debt amounted to EUR 269 million, up from EUR 237 million.

The Group is in compliance with all covenants taking into account that reporting of ADSCR (Annual Debt Service Coverage Ratio) has been exempted for reporting as per 31.12.2024.

Cash flow from operating activities amounted to EUR 0 million in 2024 (EUR 11 million).

Cash outflow from investing activities amounted to EUR 36 million (EUR 40 million), primarily due to investments in new power production capacity, either through construction of new plants or acquisitions of operating companies.

Cash inflow from financing activities amounted to EUR 32 million (outflow of EUR 11 million in 2023). Shareholders contributed with new capital of EUR 32 million (EUR 65 million). The Group received EUR 41 million from new loans (EUR 54 million) and paid EUR 15 million (EUR 88 million) in instalments on credit facilities and leases. Dividends of EUR 15 million (EUR 37 million) were paid to the shareholders.

Småkraft is exposed to operational risks, such as failure of the power producing equipment or other vital equipment. To limit these risks, the Småkraft Group has well-established procedures and emergency preparedness plans. All power plants are insured, and production is covered by interruptions insurance. Considerable efforts have been made to manage the QHSE risks within the company.

Due to its significant growth, Småkraft is continuously working on financing initiatives with new equity and debt. Småkraft’s shareholders have committed to providing equity for at least 50% of the agreed price for upcoming investments. The company is actively working with banks and debt investors to finance the remaining part of the investments. In addition, several of the ongoing construction projects will be finalized and construction loan facilities will be rolled over to and refinanced with long term debt structures.

The Group is exposed to a range of financial risks: Market-, climate-, liquidity-, currency-, interest rate and credit risk. The financial risk management process focuses on the unpredictability of financial markets and aims to minimize potential adverse effects on the Group’s financial performance. To some extent, the Group uses derivative financial instruments to reduce certain risk exposures. Financial risk management is carried out at a Group level, where the financial risks are identified, evaluated and hedged in close co-operation with the Group’s operational units.

The board of Småkraft AS has established written principles for risk management of foreign exchange risk, interest rate risk and the use of derivative financial instruments and defined cash deposits as an integral part of our risk policy.

Significant volume, price, and foreign currency exchange risks are associated with the production and sale of electric power. Only a few of the Småkraft AS power plants have reservoirs, and unregulated power production is more exposed to fluctuations than regulated production of electric power.

Hydrology, power prices and capture rates remain the main risk factors for the upcoming periods.

Småkraft halted its hedging activities during the summer 2021, and during 2024 the company has adjusted some of its current hedges to better match its production volatility during the year. Reduced future power prices increase indirectly unrealized hedge loss. The reduction in future prices has decreased the unrealized losses and consequently improved Småkraft’s equity ratio by reversing preceding years derivative accruals.

Småkraft may also be affected by a changing climate, and the company has initiated several measures to identify potential risks and opportunities. Evaluation of new acquisitions and development opportunities are assessed in light of the expected changes in hydrology. During detailed planning of new plants, we now assess how climate change can affect the design criteria for new installations, both in form of increased run-of, but also the safety of installations in relation to extreme weather.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities, to ensure sufficient cash or cash equivalents at all times and for operations and to be able to finance its operations and investments in line with the Group’s strategic plan. At the end of 2024, Småkraft held cash and cash equivalents amounting to EUR 36 million including time deposits of EUR 8 million classified as other receivables. This is deemed to be sufficient funding for the Group’s current activity levels and committed capital expenditures during 2025. The Group aims to mitigate the market and liquidity risks through further cost reduction and efficiency improvement programs with a continued focus on capital discipline.

The Group operates internationally and is exposed to foreign exchange risk arising from various exposures to currency fluctuations, primarily with respect to EUR and NOK. The Group seeks to minimize these risks through currency hedging via financial instruments.

The Group’s exposure to the risk of changes in market interest rates primarily relates to its long-term debt obligations at floating interest rates.

The Group evaluates the level of interest rate hedging based on assessment of its total interest rate risk and currently has a combination of fixed and floating interest rates in order to limit exposure. The Board of Directors regularly reviews the interest rate hedging of the external financing and mandates administration to execute necessary changes. Including interest rate swaps entered into, the fixed-rate portion of the Group’s interest-bearing debt is approximately 56% as of 31 December 2024.

The current primary market for the Group’s services is hydro power production, which is sold through brokers to Nord Pool. The Group conducts ongoing credit evaluations of its power brokers and generally does not require significant collateral. Credit risk is considered to be limited.

The financial statements have been prepared on the basis of the going concern assumption, which the Directors have confirmed that this was realistic at the time the accounts were approved. In assessing the going concern assumption, the Directors and management have considered cash flow forecasts, funding requirements and production capacity. Despite Småkraft’s geographical diversified production capacity, robust balance sheet with low leverage, and a long-standing relationship with its key lenders, the capital market may become more challenging and future funding sources somewhat more restricted. The Group’s refinancing risk is diversified, and its long-term debt obligations consist of secured bank debt, bonds and USPP financing maturing at different times until august 2034. Taking all relevant risk factors and available options for financing into consideration, the Board has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future.

In 2024, Småkraft successfully refinanced its EUR 160 million main bank facility, which also includes an undrawn revolving credit facility of EUR 20 million. In November 2024, Småkraft issued a tap issue on Green Bond 3, raising EUR 24.5 million at favourable terms. There are no major loans maturing in 2025.

Based on this the Board is presenting the financial statements on going concern.